The percentage method withholding tables for 2010 may surprise some payroll professionals because of two interesting aspects:

There are nine wage brackets (vs. seven in 2009)

As wages increase, the tax rates increase, then decrease, and then increase again. Interestingly, the progression of numbers is different and the dip takes place earlier in the progression for marrieds than it does for singles/heads of households.

Both of these changes have been implemented to make withholding more accurately reflect a taxpayer's income tax liability, IRS tells APA, given the fact that the taxpayers with modified adjusted gross income (AGI) over $75,000 (single filers) and $150,000 (married filers) and $190,000 (married filers).

These changes were not implemented in the revised tables for 2009 (issued four days after the American Recovery and Reinvestment Act was signed into law; see PAYROLL CURRENTLY, Issue No. 4, Vol. 17) because it was felt it would be too radical a change for payroll systems to quickly implement on such short notice.

2.

New Earned Income Credit (EIC) Tables

New EIC tables have been issued for wages paid after December
31, 2009. A 2010 EIC W-5 Form must be completed to utilize the
new rates. The IRS has published the 2010 W-5 Form and it can be
downloaded from our website at:

3.

New Medical Premium Rates

Even though this pay cycle is for the period December 16-31, 2009, the medical premiums for January 11th check is for January coverage. Therefore, the new rates are in effect now.

To view your current medical and dental carrier, go to the Employee Benefits section within WEBPBS at http://www.wsu.edu/webpbs.

The new fair market value has been installed for the insurance premiums of domestic partners medical insurance.

If employees have any questions about their premiums, please contact Mike Olin (509) 335-1278.

4.

Medical Flexible Savings Accounts

989 employees who took the opportunity during Open Enrollment to sign up for medical flexible savings accounts will see their reductions reflected in this paycheck. Contributions to medical flexible accounts are not subject to federal income taxes, social security or medicare tax.

5.

Combined Fund Drive

We no longer receive a copy of our employees’ enrollment or pledge sheet. The forms have been replaced with an electronic feed of enrollment data from the Department of Personnel in Olympia. Payroll will no longer have any information about annual pledges or charities employees have selected. 79 transactions were processed for this pay cycle.

6.

Dependent Care

Enrollments for 113 employees have been processed this payroll for new or renewed enrollments in Dependent Care (GTN 010).

7.

Fall Work Study Limits

Fall work study limits and balances will be removed after this payroll calculation so that Spring amounts can be applied.

8.

2009 W-2 Fast Facts

9.

New Withholding Calculation NRAs

For 2010, a new procedure applies for figuring the amount of income tax to withhold from the wages of nonresident alien employees performing services within the United States. This procedure requires use of a new chart and new tables in addition to the withholding tables used to figure income tax withholding on other employees.

Instructions. To figure how much income tax to withhold from the wages paid a nonresident alien employee performing services in the United States, use the following four steps.

Step 1. Add to the wages paid to the nonresident alien employee for the payroll period the amount shown in the chart below for the applicable payroll period.

Amount to Add to Nonresident Alien Employee's Wages
for Calculating Income Tax Withholding Only

Payroll Period

Add Additional

Semimonthly

$ 85.42

Step 2. Use the amount figured in Step 1 and the number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding using the tables that are used to figure income tax withholding for all other employees. If you use the percentage method tables reduce the amount figured in Step 1 by the value of withholding from the percentage method table by $152.08.

Step 3. Use the amount you figured in Step 1 after subtracting the value of withholding allowances claimed (generally limited to one allowance) to figure an amount from the Tables for Withholding Adjustment for Nonresident Aliens for Wages Paid in 2010 below.

SEMIMONTHLY Payroll Period

If the wag after being increased by $85.42 and (after subtracting the value of withholding allowances) is:

The amount of income tax to withhold is:

Over-

But not over-

of excess over-

$0

$85 . . .

$0.00

$85

-$252 . . .

$0.00 plus 10%

-$85

$252

-$2,821 . . .

$16.70

$2,821

-$3,654 . . .

$16.70 less 2%

-$2,821

$3,642 and over

. . . . . . . .

$0.00

Step 4. Add the amounts you figured in Steps 2 and 3. The total is the amount of income tax to withhold from the nonresident alien employee's wages for the payroll period.

Please contact Alice Smethurst at (509) 335-1277 or alice@wsu.edu if
there are any questions.